Daily Forex News by XtreamForex.com

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EUR/USD Hits Three-Week Low Around 1.1030 Amid Strengthening USD

The EUR/USD pair has seen selling pressure for the fifth consecutive day, dipping to a fresh three-week low near the 1.1030 mark during Thursday’s Asian session. This bearish momentum is driven by broad US Dollar (USD) strength, pushing the pair below the 50-day Simple Moving Average (SMA).

A stronger-than-expected ADP employment report and a robust US JOLTS Job Openings survey have reinforced views of a resilient US labor market. Coupled with Federal Reserve (Fed) Chair Jerome Powell’s hawkish comments earlier this week, expectations for a significant rate cut at the November FOMC meeting have cooled. Additionally, the growing geopolitical risk of escalating conflict in the Middle East has boosted demand for the safe-haven USD, helping it recover from its lowest level since July 2023 and reach a three-week high. This USD strength has continued to weigh heavily on the EUR/USD pair.

Further weakening the euro is the increased likelihood that the European Central Bank (ECB) will lower interest rates in October. This follows Eurozone inflation data showing a decline to 1.8% in September, below the ECB’s 2% target. ECB Governing Council member Martins Kazaks also highlighted the rising risks to the economy and stressed the importance of cautious monetary adjustments. This adds to the bearish sentiment surrounding EUR/USD, which has seen a sharp pullback from its 19-month peak.

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EUR/USD Hovers Near Mid-August Lows, Remains Vulnerable Around 1.0975

The EUR/USD pair starts the week on a subdued note, consolidating last week’s sharp losses, which brought it to its lowest level since mid-August following strong US employment data on Friday. The pair is currently trading around the 1.0975 level, looking vulnerable to further declines after pulling back from a 14-month high, just above 1.1200.

The US Dollar (USD) remains strong, hovering near a seven-week high, as traders reduce expectations of a significant interest rate cut by the Federal Reserve (Fed) in November. This shift follows unexpectedly robust US jobs data, which showed 254,000 jobs added in September, far surpassing expectations. Additionally, the Unemployment Rate dropped unexpectedly to 4.1%. These figures point to a resilient US labor market, and stronger-than-expected wage growth has reignited inflation concerns, dampening hopes for aggressive rate cuts by the Fed.

Currently, the market is pricing in a 95% probability that the Fed will reduce interest rates by 25 basis points at the conclusion of its two-day policy meeting on November 7. Meanwhile, geopolitical tensions in the Middle East have further supported the USD Index (DXY), which tracks the dollar against a basket of currencies, marking its best weekly performance since September 2022. In contrast, the euro is weighed down by expectations that the European Central Bank (ECB) will cut rates in October due to slowing inflation and economic growth.

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USD/CHF Gains Momentum Above 0.8550 Ahead of FOMC Minutes

The USD/CHF pair is trading higher, hovering around 0.8575 during early European trading on Wednesday. This strength comes from a firmer US Dollar (USD), supported by fading expectations of aggressive rate cuts by the Federal Reserve (Fed). Investors are now focused on the release of the Federal Open Market Committee (FOMC) Minutes later today.

Last Friday’s stronger-than-expected jobs report boosted the Greenback, prompting markets to scale back their expectations for significant interest rate cuts. Boston Fed President Susan Collins noted that, as inflation trends soften, further rate cuts are likely. On the other hand, Atlanta Fed President Raphael Bostic emphasized that the labor market remains resilient, and while inflation is improving, price levels have not yet reached target goals.

As the week progresses, attention will shift to Thursday’s US Consumer Price Index (CPI) inflation report, which could provide further insight into the Fed’s future rate decisions. The headline CPI is anticipated to increase by 2.3% year-on-year (YoY) in September, while core CPI is projected to rise by 3.2% YoY. Any signs of easing inflation could weigh on the USD and potentially limit gains for the USD/CHF pair.

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GBP/USD Tests 1.3000, Faces Challenges Amid BoE Dovish Outlook

The GBP/USD pair moved closer to the 1.3000 mark during Wednesday’s Asian session, though the British Pound (GBP) encountered resistance due to weaker UK economic data. Falling consumer and producer inflation, alongside disappointing labor market figures, have raised market expectations that the Bank of England (BoE) might cut interest rates by 25 basis points in November, with another quarter-point reduction anticipated in December.

On Tuesday, BoE Governor Andrew Bailey stressed the need for the central bank to improve oversight of the opaque non-banking financial sector. Speaking at a Bloomberg event in New York, Bailey stated, “We are nearing a shift from rule-making to surveillance” to better monitor financial activities outside traditional banking.

Additionally, BoE Deputy Governor Sarah Breeden is set to participate in a panel discussion on financial regulation hosted by the Institute of International Finance (IIF) in Washington on Wednesday.

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EUR/USD Rebounds from Multi-Month Low, Eyes 1.0800 Ahead of Flash PMIs

The EUR/USD pair is showing signs of recovery during Thursday’s Asian session, breaking a three-day losing streak that saw it hit its lowest level since early July, near the 1.0760 region. Spot prices have edged closer to the 1.0800 level in recent hours, buoyed by a slight pullback in the US Dollar (USD). However, bullish traders should exercise caution due to underlying market conditions.

A retreat in US Treasury yields from a three-month high has led to some profit-taking on the USD, following its recent rally to levels last seen in late July. Still, the expectation that the Federal Reserve (Fed) may implement only modest rate cuts, coupled with investor caution ahead of the November 5 US Presidential election, could provide support for the USD as a safe-haven currency. Additionally, dovish signals from the European Central Bank (ECB) are likely to limit any significant upward movement for the EUR/USD pair.

Eurozone inflation fell to 1.7% in September, dipping below the ECB’s 2% target for the first time since June 2021. This reinforces the ECB’s view that inflationary pressures are easing and supports the likelihood of further policy easing. On Wednesday, ECB official Mario Centeno noted that downside risks are prominent for both growth and inflation, hinting that a 50 basis point rate cut in December is under consideration. Similarly, ECB’s Bostjan Vasle highlighted data suggesting potential delays in the expected recovery in growth.

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